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SEC Asks New York Judge to Determine Whether to Hold Elon Musk in Contempt

Erin Corbett
SEC Asks New York Judge to Determine Whether to Hold Elon Musk in Contempt

The Securities and Exchange Commission asked a New York judge on Monday to decide whether Tesla, Inc.’s Chief Executive Officer Elon Musk violated the terms of a settlement agreement that the two parties reached last year.

Last month, the SEC asked a federal judge to hold Musk in contempt of court, arguing one of his tweets from Feb. 19 violated language in the settlement.

Musk tweeted at the time that Tesla “will make around 500k” cars in 2019, which the SEC argued violated an agreement requiring Tesla to vet all of Musk’s public communications about the company. Musk amended the tweet within several hours.

On Friday, Musk defended his Twitter use to New York Judge Alison Nathan, arguing in court papers that the SEC’s contempt request relies on a “radical reinterpretation” of the settlement.

Musk’s lawyers included email communications and drafts of the original settlement, which show the SEC wanted all of Musk’s public communications about Tesla, including tweets, to be approved by the company before publishing. Musk allegedly turned down that version of the settlement.

The SEC claimed last week that Musk has not had a single tweet about Tesla pre-approved by a lawyer “in the months since the court-ordered pre-approval policy went into effect.”

According to Musk’s lawyers, when the two parties were originally reaching an agreement, they argued to the SEC that “Musk’s ability to engage with customers about Tesla products is critical to Tesla’s success, and that Musk would not agree to broad pre-approval of Tesla-related statements.”

In Monday’s communications to Nathan, the SEC argued that Musk’s defense relies on “selective omission of certain settlement communications,” Bloomberg reports . The agency offered to provide more information about the terms of the settlement if needed.

Legal experts who spoke with CNN said Musk could face consequences including a fine, further limits on his communications and his social media use, and his removal as Tesla’s CEO.

On the other hand, they said Nathan could toss out the settlement, which would reopen Musk to legal action on behalf of the agency.